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ERP for Accounting: How to Determine the Requirements You Need in a Manufacturing Environment

5/2/18 10:00 AM


ERP accounting requirements are like cars

Let’s talk about the Porsche 911 and Chevy Spark. While both are cars, there is a big difference between the two. The 911 is a refined sports car with a base price of $91,000. The Spark is an economy car with a base price of $13,050. Both will get you safely from point A to point B; both have an engine, doors, windows, breaks, airbags, etc. Clearly though, they are not the same and aren’t even in the same market. They appeal to different types of buyers and are designed with that buyer in mind. If you go no further than category of vehicles and only look at price, you could end up buying a Spark, going to the racetrack, and being on the receiving end of a humbling experience.

The same is true with ERP systems being used for accounting purposes. Sure, each software product has a general ledger account structure, can generate invoices and cut checks, create financial statements, etc. But like the 911 and Spark, how the system does it and what ERP accounting module features it has makes a big difference between products. To choose the right product, you need to understand your requirements.

Related: How to conduct an ERP search

Requirements vs. goals

After reading the previous section, you may have made a mental note about the importance of software requirements when looking at ERP for accounting. To focus on those requirements first is jumping the gun and a very common phenomenon in ERP evaluations. The first thing that needs to be defined is the business goals as they relate to your accounting needs. Finding ERP products that fit your business environment (size of company, type of business) and accounting department is the second step. Developing the software requirements an ERP system for accounting must have is the third step – based on the goals the business wants to achieve. Skipping the first two steps and starting with the third step is dangerous because you are just focusing on the software. Since you want to buy ERP software, you may be wondering what the harm is in looking at software requirements. It may actually feel like the right thing to do. The harm isn’t looking at software requirements; the harm is only looking at software requirements.

Let’s go back to the car analogy. The same three-step requirement process takes place, but the first step may not have felt like a step at all. You went through it though – you defined your transportation goals:

  • We are a family of two adults, four kids, and a dog. We want a vehicle we can all fit in.
  • There are just two of us; we want something basic.
  • The kids are gone, there are just two of us, and we want something fun!

It may not feel like you went through this step of goal identification because it’s a reflection of where you are in life. You didn’t have to think about it a lot, but the step was taken. That’s why a couple looking for something fun doesn’t wander into a dealership that sells tractor trailers; and a family of six doesn’t look at two-seat sports cars. Once you’ve defined the type of transportation needed, then you select different cars meeting that need, and compare features. Goals flow into features.

The same applies when you’re evaluating ERP accounting system examples and options. Start with the goals, let those goals flow into the products that fit your company and needs, and then look at the different features of each product. The criteria used to judge the features needs to be related to your goals. In other words, will this feature help me reach the business goals? If the answer is “no,” the feature is useless. Only focus on the features that will help the company reach their goals and what you’ve established is the ideal ERP system for accounting. That may sound boring, but that’s how you choose the right product and minimize your risk.

Definition of ERP accounting requirements

Every manufacturing company needs to take orders, invoice customers, buy raw materials, pay vendors, and produce financial statements. With the exception of low-end ERP products that integrate with QuickBooks, all ERP systems have functionality that handles accounting. By no means am I saying they are all the same, but the basic functionality is there.

Here are the types of things I hear from accounting departments that they wish they had:

  • Accurate inventory counts
  • Accurate inventory valuation
  • Accurate job costing
  • Accurate work in process (WIP)

Notice a trend here? All of these counts and costs are created in production. Accounting should take the four bullet points above and turn those into business goals. Since you will be looking into an integrated ERP accounting module, it’s important for the “number crunchers” to understand how transactions flow into the general ledger. We have replaced a lot of systems with our ERP products, and each one we replaced handled A/R, A/P, G/L, and financial statements. Your new ERP will also. Getting accurate, timely information from the manufacturing side of the business will bring your company to the next level. Focus on that.

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Topics: ERP selection

Jack Shannon

Written by Jack Shannon

Jack is the President of Visual South and has been working with ERP since 1996 when he bought it in his role as a Plant Manager. Since 1998 he has worked for Visual South with roles in consulting, sales and executive management.